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ATO Debts Worrying You?

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Debts with the ATO can be daunting and something that many of us prefer not to think about.  We also know that no matter how hard we try to avoid thinking about these debts they never go away.   

Believe it or not, the ATO are extremely supportive of small to medium sized businesses.  They are such a crucial part of our community that assisting them is a priority.  If the debt has come about due to a genuine mistake or through cash flow difficulties or the like, the ATO can assist by setting up Payment Plans in order to help reduce and eliminate the debt.   

When entering a payment plan, the first requirement is that all returns and activity statements are lodged up to the current date.  The payment plan will cover the outstanding amount payable at the time the plan was initiated.  The repayment amount is suggested by you, the business owner, and should be a reasonable amount which fits within your business’s budget at the time.   

Going forward, you should note, the payment plan will not cover any future activity statements or returns.  The new statements or returns will be expected to be paid on or before the due date.   

Whilst the unfavourable cost of business, taxes, will never go away – it is reassuring to know that when we become a little stuck for cash flow, there are options to carry us through.  It is crucial to stay on top of our lodgements though – always keep your activity statements and tax returns lodged, up to date! 

How Small Businesses can better build credibility online

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Building credibility is important for small businesses to build trust and encourage more customers to buy your product/service. Check out these five killer tactics to set yourself apart and establish your business as trustworthy.  

1. Show Your Achievements  

Showing your wins is super important to establish your credibility. You should recognise and celebrate your achievements, from helping clients achieve goals to winning an award.   

Post these achievements on social media, put in in an email blast, include in on your website. If you have a trophy or plaque, showcase that in your office/store.   

When you tell everyone that your business achieved something, they are likely to think positively about your business. It also encourages potential customers to make a buying decision as well.   

2. Publish detailed case studies  

A super easy way to build credibility is to publish case studies of some clients that you have worked with.   

A detailed case study will be effective to convince readers that you are skilled in what you do and have knowledge in the related industry. This will help boost your business’ credibility.  

You should go into details of what you have done for the client. Outline the problem, how you solved it and the achievements. Photos and videos are great to demonstrate this as well.  

And to let everyone read it, make sure you share it on social media and email campaigns. The case study section should be easily accessible from the home page of your website as well.  

3. Highlight your uniqueness  

What do you offer than stands out from your competitors? What sets you different? What is one thing that your customers need but no one offers it yet?  

If you highlight your uniqueness and make your business stand out, your audience will be likely to choose you rather than your competitors.   

You should also convince your customers why they should choose you; this can be done effectively with the use of case studies highlighted in (2).  

4. Share your knowledge  

When you share your knowledge on platforms such as social media, website and email campaigns, you will convince your audience that you have solid knowledge in the industry and is a thought leader.   

Give as much as you possibly can, whenever you can – within reason and within your limit of what is comfortable for you.   

You can simply share it on social platforms, or build a landing page on your website that provides an ebook or video series to customers who sign up to your newsletter. This way, you will get some leads and build credibility at the same time.  

5. Be a featured guest  

When you become a featured guest on podcasts, summits, interviews, and other websites as a guest poster, you are building credibility for yourself and business.   

Why? Because it shows that the host respect you, your business and what you have to say. It also helps reach more people and build brand awareness as well.  

What are some ways that you use to build credibility? Let us know in the comment below!  

NEXT STEPS:  

If you need help, don’t hesitate to contact us! Give us a call or book a consultation on 07 3367 0852.

You can also check out some of our articles:

What the 2020 Federal Budget means for you

How to improve wellbeing in the workplace 

Tips to advertise your small business for free    

 

Tips to outsource work for small businesses

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As a small business owner, you already have so much work. Trying to do everything on your own can be overwhelming. It also prevents you from spending your precious time doing more valuable work that can better grow your business.  

To solve this problem, you can consider outsourcing, or giving your work to someone else outside of your main business. Outsourcing can bring many benefits to your business: cut costs, increase efficiency, reduce risks, speed up processes, etc. Read on for some tips to outsource work while keeping quality work.  

First, understand why you want to outsource work  

Why do you want to outsource work? To save money, add value for clients, gain expertise, help your business grow or simply convenience?  

Having a clear motivation and a goal is helpful to keep track of the quality and measure success.  

Second, identify tasks you’re not good at  

If you spend too much time doing something that you do not excel at, finding an expert to do it would save you a lot of time.   

Additionally, an expert would do the job well, so they will likely bring positive results. In other words, you don’t have to do it or allocate it to an employee and worrying about messing up.  

You will also be able to do the tasks with an economy of scale. For example, if you need help with building a website, you can hire a web agency to help design, build and optimise the website. This will be much more cost-efficient than hiring a new full-time employee or a team on a part-time basis that have all the skills you need to build a website.  

Third, choose the right service provider  

Whether you are looking for someone to complete one job or for a long period, you should handle the hiring process the same way you do for a permanent employee.  

To ensure you get a good quality of work, look for companies or contractors that are highly rated. You should look at their previous experience and achievements, work portfolio/samples, case studies and ratings.   

You should require a paid test project from at least three people/companies. It can be expensive to pay people just for a test, but you will be able to know if they can handle your project before trusting them with real, important work.  

Finally, interview them. If you can, do a face-to-face meeting with them, or conduct a video chat if you can’t. This will help you get to know them individually, make sure you get along and help with a better working relationship.  

Communicate, communicate, communicate  

Now that you’ve chosen the right contractor, you will need to make sure they are aligned with your goals. Communicating regularly is super important to make sure that the contractor is on the right track.   

When the contractor starts the job, you should communicate your expectations and the steps included in the job.   

You should also ask them to update you frequently about the work process. If they don’t do this, follow up.  

Providing detailed feedback would also be effective to ensure that the work is going in the right direction.  

What about data security?  

You will have to give the contractor access to the data that they need. This means that they may need to access to your IT system and confidential data.   

To prevent data theft, you should put necessary security measures and review their compliance certificates in handling client data if they have any.   

You should only provide the contractor with the absolute minimum data necessary for the provider to do the work.  

Conclusion  

Outsourcing work is a good solution to help you get more done in less time. If you prepare well, do research and use the right techniques, outsourcing work will be beneficial for you and your company.  

NEXT STEPS:  

If you need help, don’t hesitate to contact us! Give us a call or book a consultation on 07 3367 0852.   

You can also check out some of our articles:         

What the 2020 Federal Budget means for you

How to improve wellbeing in the workplace 

Xero Document Packs are here for easy, quick and secure e-signing  

Tips to advertise your small business for free    

 

What the 2020 Federal Budget means for you

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To kickstart the economy after Australia’s massive COVID-19 outbreak, the Federal Government has released a huge spending and tax cuts Budget for 2020. 

Here is our summary of the 2020 Federal Budget and what it means for you. 

  • This appears to be a great Budget for the young, anyone still working and business owners.  
  •  The massive Government spending, tax cuts and wages subsidies will lead to higher spending throughout the economy and ideally greater business investment.  
  • This pushes up confidence and job creation so hopefully more economic growth.  

There are a few key areas we would like to make you aware of. 

I, Business Owners 

Tax Loss “Carry Back” 

If your business is making losses now because of the COVID-19 recession, you can get a tax refund out of the taxes you have paid on profits going back to the 2019 year. And you can use the “carry back loss” trick for the 2021 and 2022 financial years. 

Specifically, a company can carry back losses from the 2020, 2021 and 2022 financial years to offset previously taxed profits in the 2019, 2020 and 2021 financial years. 

However, this only applies to companies. Sole traders, partnerships and trusts won’t be able to access this benefit. 

This tax refund will be available as a choice to be made when a company lodges its 2021 and 2022 Tax Returns. 

Immediate Asset Write Off 

The Government wants businesses to spend big. This measure allows businesses with a turnover of less than $5 billion to claim a full up-front tax deduction for the cost of new business assets. There is no cost cap with this measure – it is not limited like the previous $150,000 instant asset write off that is in place until 31 December 2020. 

This applies to the purchase of capital assets from 6 October 2020 and first used or installed by 30 June 2022. 

This means that if you buy a new truck for $250,000, then you get a 100% tax deduction in year one. 

*Important: Remember, this does NOT mean that you get $250,000 in tax back. You effectively save tax at your marginal tax rate. So, a company with a 27.5% tax rate will save $68,750 in tax if they buy a $250,000 truck. 

For businesses with a turnover under $50 million, this also applies to secondhand assets. 

Small Business Pooling – Immediate Write Off 

Small business entities that have a turnover of less than $10 million using the simplified depreciation rules can claim as an expense the balance of their simplified depreciation pool at the end of the 2021 year. 

This is great because it gives business owners a tax deduction for the full amount of non-depreciated assets they have purchased in prior years. 

JobMaker Hiring Credit 

The JobMaker hiring credit will be available to eligible employers over 12 months from 7 October 2020 for each additional new job they create for an eligible employee. 

Employers will receive $200 a week for hiring someone aged 16 to 29 and $100 a week for taking on someone aged 30 to 35. 

The JobMaker hiring credit will be paid quarterly in arrears and will be available for 12 months from the date of employment with a maximum amount of $10,400 per additional new position created. 

To be eligible, the employee will need to have worked for a minimum of 20 hours per week averaged over a quarter, and have received the JobSeeker Payment, Youth Allowance or Parenting Payment for at least one month out of the three months prior to when they are employed. 

Employers will need to prove that the new employee will increase overall employee headcount and payroll. 

Boosting Apprenticeship Commencements 

A business that takes on a new or recommencing Australian apprentice will be eligible for a 50% wage subsidy. The subsidy is paid in arrears and is available for wages paid from 5 October 2020 to 30 September 2020, up to a maximum amount of $7,000 per quarter. 

FBT Changes

A few FBT changes have been announced, including removal of FBT on car parking and portable electronic devices from 1 April 2021, and on retraining and reskilling costs for employees from 2 October 2020. 

R&D Tax Incentive Changes 

The Government has backflipped on previously proposed cuts to research and development tax incentives.  

For small companies (turnover less than $20 million) the refundable R&D tax offset will be set at 18.5% above the company tax rate and there won’t be any cap on annual cash refunds. 

The R&D laws are quite complex, so please feel free to contact us for further information if R&D is something that your business would like to claim. 

II, Individuals 

Personal Tax Cuts 

To kick start the economy, the Government is introducing tax cuts totaling $50 billion backdated to 1 July 2020. 

There are 2 key parts to it. An offset which will get paid in a lump sum after July next year when you lodge your 2021 Tax Return, and an immediate reduction in the tax taken from your wages as soon as this legislation passes Parliament. 

In both cases there is nothing you need to do and no extra forms to fill out at tax time – the adjustments will happen automatically. 

Here’s what tax cuts you’ll get: 

The average teacher’s wage is around $90,000, so a couple who both teach can expect a tax cut of up to $3,060. That’s massive! The big question is if people will spend these tax cuts or reduce their home mortgages and save them. 

$250 Economic Support Payments 

A payment of $250 in December 2020 and another payment of $250 in March 2021 will be made to individuals receiving Age or other pensions and health care card holders. These payments will be exempt from tax and will not count as income support for any income support payments. 

Superannuation – “Stapling” of Accounts 

This is something that really makes sense. Under this measure, an individual’s super account will be “stapled” to them as they change jobs. New super accounts will no longer be automatically created every time someone starts a new job. 

Capital Gains Tax removed from “Granny Flats” 

Currently, there is a risk of capital gains tax (CGT) applying if you sell your family home and if you have entered a formal granny flat arrangement with an elderly parent or relative. The Budget has now included a measure where CGT will not apply to this. 

NEXT STEPS: If you have any questions about how the 2020 Federal Budget affects you – please contact us and one of our expert accountants will help you!

How to improve wellbeing in the workplace

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Let’s face it, most people spend the majority of their waking time at work. Stress, long hours of staring at the screen, tough targets, and a poor work-life balance can have a huge effect on people’s physical and mental health. Thus, it’s crucial for companies to take staff wellbeing seriously. Furthermore, research has shown that happy and healthy employees improve overall team productivity. So how can businesses promote wellbeing in the workplace effectively?   

Here are some ideas for you to get started:  

1, Create a productive environment  

Design an area with seating and tables where staff can gather and collaborate with each other is a good idea. You should also install some good lighting, colors, and plants to prevent fatigue and make the office more inspiring.  

2, Encourage staff to exercise  

You can encourage staff to walk or bike to work. Encouraging them to take walks around the building during breaks is also a good idea. Another way to motivate employees to exercise is to give them discounts to a local gym. This will also let people socialize outside of work as well.  

3, Provide healthy office snacks  

Instead of having soft drinks and sugar-loaded snacks in the office fridge and pantry, you can offer baskets of fresh fruit and healthy snacks. This will encourage employees to eat healthier and improve their productivity.  

4, Share healthy meals photos, and recipes  

You can share healthy meal photos and recipe ideas to your team through the company group chat or emails to encourage staff to eat healthily. This will also build team spirit and give them inspirations to diversify their meals.  

5, Encourage communication  

The communication of wellbeing needs at work is important but often overlooked. Many people feel uncomfortable about talking about how they feel about work and ashamed to show that they need support.   

Communication is the key to receiving help and solving the problem. Employers are responsible for supporting staff wellbeing, but they need to know the situation to do it. Therefore, if you encourage these conversations (e.g. offer one-to-one sessions), you can be more aware of what employees go through and how to improve it. This will also improve openness in the workplace and cultivate a company culture of acceptance. 

 

NEXT STEPS:     

 If you need help, don’t hesitate to contact us! Give us a call or book a consultation on 07 3367 0852.  

 You can also check out some of our articles:        

Xero Document Packs are here for easy, quick and secure e-signing 

Tips to advertise your small business for free   

Unhealthy remote work habits to avoid   

Effective ways to increase your market share   

Opportunities are opening up during Coronavirus crisis

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While many Australians are losing their jobs due to the coronavirus outbreak, some businesses and industries are looking for new workers. Although hospitality and retail industries are facing a huge risk of collapse because of social distancing policies to stop the virus from spreading, many jobs are being created. 

For example, North Queensland’s resources sector is creating many jobs because companies are expanding during the pandemic. Sun Metals in Townsville is expecting to create 350 construction jobs by about October, and 100 ongoing positions as construction finishes in the second quarter of 2021. Ravenswood Gold started hiring contractors and 150 permanent employees it needs by mid-2021 because it is looking to extend the mine’s life with a large-scale open pit at Ravenswood, south-west of Townsville. Similarly, in Central Queensland, BHP has recently put on over 100 apprentices in Mackay and Pembroke has received conditional approval to build a new coking-coal mine in the Bowen Basin, which promises to create new jobs soon.  

The central Queensland town of Emerald has a shortage of important migrant workers because of COVID-19 travel restrictions. The return workers who would have arrived in April could not come back, so 2PH Farms in Emerald, one of the largest privately-owned mandarin orchards in the Southern Hemisphere, hired 100 people from within Australia to fill the essential jobs.  

Health care and social assistance could be some of the most stable job sectors ahead. Researchers believe healthcare and social assistance are sectors likely to remain stable after coronavirus. The reason why jobs are stable in this field is that the government provides funding and support to keep these jobs going. Furthermore, data from the federal government shows that health care and social assistance were predicted to grow by 250,000 jobs by 2023. With an aging population and a reduced number of the migrant workforce due to the coronavirus outbreak, new jobs are very likely to be created in this field.  

The pandemic could be an opportunity for rural economies to develop, as regional areas generally have problems attracting skilled labor and as a result, employ backpackers or migrant workers. But these sources of labor are not widely available at the moment due to travel restrictions, so some opportunities are opening in regional areas and are attracting people from other parts of Australia. The new ways for people to work remotely from the CBD office towers may also enable a population shift to the regions. 

We also expect to see small business opportunities pop up as the whole economy undergoes massive change. Be on the lookout for new ways of working, new products/services or other opportunities that could maybe just turn the pandemic into an opportunity for you and your business to prosper and grow. 

Helping you and your business reach your goals and provide you the lifestyle you desire is what we do.  So make sure you talk to us when you do find that great opportunity. 

Xero Document Packs are here for easy, quick and secure e-signing

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Xero Document Packs is an electronic signing application using Adobe Sign for all documents that need to be signed. With this great tool, you can sign documents online without the hassle of printing, signing, and sending. Our team at RA Business Advisors uses Xero Document Packs and we think that it is super easy and quick to use this tool. Read on to know more! 

We combine tax returns from Xero Tax, reports from our clients’ Xero organization, and PDFs that we upload. Then we add any extra signature lines, upload the document pack to a secure online portal and invite clients to log in and sign using Xero Sign powered by Adobe Sign. 

Why is it useful? 

1, Improve efficiency 

You can just log in and sign with Xero Sign powered by Adobe Sign. No need to print, sign, send and file documents.  

2, Safe and secure 

Documents that need to be signed are stored in a secure Xero portal. Adobe Sign securely stores the signed tax return and the e-sign audit trail. You can also access a copy from Xero Tax anytime. Did we mention that Adobe Sign is the best-in-class provider, with over 40 million users of e-sign services? 

3, Track who’s signing 

All signing events are tracked and IP addresses are recorded in a detailed audit log. Xero also verifies who’s signing with their email ID. 

4, Nothing new to install 

E-sign works seamlessly within Xero Tax, so there’s nothing to install and our clients can access it from anywhere. 

Sounds good, so how do I sign and authorise a document? 

A, To authorise an e-signature request you’ve been sent: 

1, Click Review Documents from the email.

2, Log into the Xero Portal: 

  • If you’re an existing Xero user, trialist, or have used the Xero Portal before, log in using your existing email address and password. 
  • If you’re not a Xero user, you’ll need to enter a password and your phone number, indicate you accept the terms of use and click Activate your account.

3, Click Review to open each document you’ve been asked to sign. If you have more than one document to sign, you’ll see a list. 

4, After you have confirmed all document details are correct, click Start. 

5, Click in the Click here to sign field to open the declaration options. You can type or draw your signature, or use an image or your mobile to sign. Click Apply to confirm the signature. The date field will pre-populate with today’s date. 

6, If your signature is required in multiple locations, click Next to jump to the next declaration. 

7, When all declarations have been completed, click Click to Sign to complete the e-sign process. 

Or check out this page for a step-by-step video. 

B, To view the audit report of the e-signed document: 

You can download your signed document at any time from the Xero Portal, using the link in the request email. This will show you the audit trail of the signed document. The report is a full audit history including the IP address of the signer, dates and times of each action. 

1, Log in to the Xero Portal using the link from the request email or by logging in to https://portal.xero.com/

2, Click Download for the signed document you want to view. 

3, Open the PDF and go to the declaration or to where your signature is. 

4, Click on the link under your signature, to open the audit report for that return. 

5, Click View Audit Report. You can also type in the transaction number for another report. 

C, Decline a request to e-sign a tax return 

1, Click Review Documents from the email. 

2, Log into the Xero Portal: 

  • If you’re an existing Xero user, trialist or have used the Xero Portal before, log in using your existing email address and password. 
  • If you’re not a Xero user, you’ll need to enter a password and your phone number, indicate you accept the terms of use, and click Activate your account. 

3, Click Review to open each document you’ve been asked to sign. If you have more than one document to sign, you’ll see a list. 

4, From the return, click Options, then select I will not e-sign. 

5, Enter the reason for declining. 

6, Click Decline. 

A decline notice will be sent to your advisor. 

How secure is it? 

Adobe Sign e-sign services comply with industry-accepted standards and certifications. Adobe Sign stores all customer data in geographically dispersed data centers with state-of-the-art environmental and data security measures. Read more about Adobe Sign security.

 

NEXT STEPS:    

If you need help, don’t hesitate to contact us! Give us a call or book a consultation on 07 3367 0852. 

You can also check out some of our latest articles:       

Taxi travel exemption now includes travel in ride-sourcing vehicles 

Tax myths to avoid during this current Tax Time   

Withdrawing super early and recontributing your super can result in consequences    

Tips to advertise your small business for free    

Taxi travel exemption now includes travel in ride-sourcing vehicles

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The ATO confirmed that ride-sourcing is now considered ‘taxi travel’ for fringe benefits tax (FBT) purposes. This change is because of amendments to the Fringe Benefits Tax Assessment Act 1986, which are now law. Travel by Uber and other ride-sourcing services now qualifies for fringe benefits tax (FBT) exemptions on the same footing as traditional taxis.  

Employers are now eligible for the exemption for travel provided to their employees in a single trip to or from the employee’s workplace:  

  • on or after 1 April 2019  
  • in a licensed taxi or other vehicle involving the transport of passengers for a fare – other than a limousine – such as a ride-sourcing vehicle.  

Employees can also be eligible for the FBT taxi travel exemption on or after 1 April 2019 if it’s as the result of sickness of, or injury to, the employee, and whole or part of the journey is directly between:  

  • the employee’s place of work  
  • the employee’s place of residence  
  • any other place that it is necessary, or appropriate, for the employee to go as a result of the sickness or injury.  

“The change is designed to help minimize compliance costs for businesses providing transport for their employees.”, said ATO Deputy Commissioner John Ford. Any benefit from travel by an employee using a registered taxi or ride-sourcing provider (other than in a limousine) is now exempt from FBT subject to meeting certain criteria.  

For more information on the FBT taxi travel exemption, go to ato.gov.au/FBTtaxi.   

NEXT STEPS:   

Don’t forget to share this post! Check out some of our latest articles:      

Tax myths to avoid during this current Tax Time  

Withdrawing super early and recontributing your super can result in consequences   

Tips to advertise your small business for free   

New residential construction stimulus package   

Tax myths to avoid during this current Tax Time

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2020 has been difficult, but your tax return doesn’t need to be. “There is always a range of myths that need busting around Tax Time and the changed circumstances this year have seen some new additions to the list,” Assistant Commissioner Karen Foat says.   

Check out this list of 2020’s top tax myths to avoid!  

1, Bank details need to be updated  

According to the ATO, last year many people in their rush to lodge early forgot to update bank details and delayed their refund. While the ATO receives information from banks, this doesn’t extend to updating details for the bank account you nominate to have your refund deposited into.  

2, You can’t “double dip”  

The ATO is concerned that some taxpayers may “double dip” by claiming their working from home expenses using the all-inclusive shortcut method while claiming for specific items such as laptops or desks. If you are claiming under the shortcut method, you cannot claim a separate additional deduction for any expenses you incur as a result of working from home.  

3, You can’t claim home to work travel  

According to the ATO, if you are working from home as a result of COVID-19, but sometimes need to travel to your regular office, you cannot claim the cost of travel from home to work as these are still private expenses. Although you are working from home, your home is still a private residence – it is not a ‘place of business’. Generally, you can only claim the cost of traveling from home to work if you are required by your employer to transport bulky tools or equipment and there is not a safe place to store these at your workplace.  

4, You can’t claim $300 if you had no expenses  

Ms. Foat stated that the ATO often sees people claiming a deduction although they did not purchase anything, and this is often because they thought everyone is entitled to claim $300. While people don’t need receipts for claims of expenses up to $300, they must have spent the money and can show the ATO how they worked out their claim.  

5, Work-related expenses must be work-related!  

The ATO finds taxpayers trying to claim personal expenses under the guise of work-related expenses, but the truth is, you can only claim for expenses that are directly related to earning your income.  

For example, if you are working in jobs that require physical contact or close proximity to customers and you had to buy your hand sanitizer, gloves, or masks to use at work, you can claim these items. On the other hand, if you are not in jobs that aren’t close to the public or if you have purchased these items for their general use, you cannot claim these items.  

Furthermore, you cannot claim for the costs of setting your children up for homeschooling, as the ATO views these costs aa being private expenses.  

6, Lodging early not necessarily means an early refund  

For this year, the COVID-19 element is likely to mean third-party information from employers, banks, private health insurers (and this year JobKeeper for employees and JobSeeker amounts) may not be fully available until later in July or mid-August. For most people, this information is ready by the end of July.   

Therefore, you should lodge when the ATO has automatically included this information for you. Lodging earlier can leave out some important information, which can slow your return down as a result. 

NEXT STEPS: 

Don’t forget to share this post! Check out some of our latest articles:    

Withdrawing super early and recontributing your super can result in consequences 

Tips to advertise your small business for free 

New residential construction stimulus package 

Unhealthy remote work habits to avoid 

Filed Under: Tax

Withdrawing super early and recontributing your super can result in consequences

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copper-colored coins on in person's hands

Thanks to the ATO’s COVID-19 early release of super, those who have been financially affected maybe able to access some of their super early. However, since there is no restriction on how this money can be spent, eligible individuals can use this money for anything they choose or save it for future expenses. They can also recontribute some amounts back into their superannuation if they meet the contributions rules (both eligibility and acceptance) and, in the case of SMSFs, their trust deed allows it.  

This recontribution strategy involves withdrawing a lump sum and recontributing these funds into super as a non-concessional or concessional contribution, in which the individual can claim a tax deduction for the contributed amount. Although recontribution strategies are acceptable, it is important to understand that the new early release scheme is aimed to help those who are affected by COVID-19, not to help individuals obtain tax benefits. The ATO is now concerned that these actions have become prevalent and has issued a warning: “COVID-19 Early release of super – integrity and compliance”.  

The ATO highlighted the following aspects of the tax law related to superannuation that can happen if individuals use the mentioned recontribution strategy: 

  • Excess contributions tax; individuals may need to pay additional tax if they exceed the concessional or non-concessional contributions cap 
  • Contributions tax; concessional contributions made to a super fund are taxed at the 15% rate by the fund 
  • affecting eligibility for a super co-contribution 
  • Division 293 tax; individuals may need to pay additional tax due to income and personal super contributions. 

Furthermore, if individuals enter the COVID-19 early super scheme mainly for the purpose of obtaining a tax benefit, the application of Part IVA can happen. The ATO says schemes under COVID-19 early release of super that attract its attention include: 

  • artificially arranging affairs to meet the eligibility criteria 
  • withdrawing and recontributing super to claim a tax deduction 
  • contributing an amount of super to claim a deduction and then withdrawing that amount. 

Where Part IVA applies to a scheme, the tax benefit obtained may be cancelled. Administrative penalties and interest charges can also apply. 

Don’t forget to share this post! Or check out some of our latest articles:   

Unhealthy remote work habits to avoid 

Tips to create a work from home schedule that works for you  

Effective ways to increase your market share  

Top tips to increase your customers in 2020 

Filed Under: Tax